Is Apple's Stock Really As Cheap As They Say?

Taesik Yoon
,
Forbes Staff
I help people build wealth one stock at a time.

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However, Apple’s prospects beyond this year are less certain. In the smartphone space, it faces growing competition from the likes of Samsung, which actually sold more phones in 2011 than Apple (95 million versus 93 million) thanks to its highly successful Galaxy S2 smartphones, which were the best selling Android-based devices last year. The recent launch of its successor, the Galaxy S3, in numerous global markets and across all four major wireless operators in the U.S. certainly won’t make things any easier. Apple’s significant lead in the tablet market could also take a hit if the Nexus 7 sells as well as I think it will. The expected launch of Microsoft’s (MSFT) Windows 8-powered tablet, the Surface, later this year poses another threat. At the very least, by launching a smaller tablet, Apple runs the real risk of cannibalizing sales of its more expensive (and probably more profitable) 10-inch iPads.

Perhaps the company has another game-changing innovation up its sleeve that will help maintain its high growth over the next several years. If it does, it better be a bigger draw than the last one. Don’t get me wrong, I consider Siri the most impressive new phone feature to debut in years. But I also don’t know a single person who uses it with any regularity or found it so impressive, it cause them to become an Apple convert.

When it comes to stocks, the larger you are and the more coverage you have, the less likely you are to be undervalued. Apple is the largest company in the world by market capitalization. It also has 51 analysts covering it. Frankly, shares have no excuse for being mispriced to the downside. To the contrary, a stock with this much bullish sentiment is usually guiltier of being overvalued than undervalued. While I don’t think that’s the case here, Apple shares are probably trading much closer to where it should be than what most analyst target prices may lead you to believe.